Magic May

The manufacturing sector recorded its highest level of activity for almost nine years, according to the latest BNZ - BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for May was 59.2 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining).  This is the highest level of overall expansion since June 2004.  Compared with previous May results, the 2013 value was the highest since the survey began in 2002.

BusinessNZ’s executive director for manufacturing Catherine Beard said that the May result showed strong activity in key aspects of the sector.

“The key sub-indicators of new orders and production have both produced strong levels of expansion for May, which has significantly boosted the national figure.  Also, after a lengthy period of time in the doldrums, employment picked up in May.

“The strong result is mirrored in the comments from respondents, which were over 58% positive – the highest this year.  A number of these comments outlined the improving building/construction sector, increasing offshore orders and new customers/opportunities for their business.  The mood of the sector is typified by one respondent noting that after 5 years they now feel confident enough to hire extra staff.”   

BNZ Economist Doug Steel said that PMI results do not get much bigger than this, even globally.

“The pick-up is material. It puts upside risk to our manufacturing and overall economic growth forecasts over coming quarters. The strong result essentially gives us more confidence that the recent and forecast upswing in construction activity will flow through to manufacturing activity, with the usual lag.”

Given the strong national result, all five seasonally adjusted main diffusion indices were in expansion for May.  New orders (63.1) again led the way with its highest result since July 2004.  This was followed by production (60.5), which was at a similar level to February this year.  Employment (55.3) rose 7.8 points to record its strongest result since November 2007, while deliveries (54.6) and finished stocks (51.8) were also in expansion.

Expansion was experienced in all parts of the country in May.  Given the increasing economic activity in the Canterbury region, the Canterbury (67.0) result was the highest since November 2007.  The Northern region (60.5) also showed a strong upswing in activity, rising 7.9 points to its highest level since November 2010.  The Otago/Southland region (60.7) bounced back from recent declines to record strong expansion, while the Central region (55.4) experienced a slight dip in its level of expansion for May.

Click here to view the May PMI
Click here to view seasonally adjusted & unadjusted time series